Venture capital funding experienced a notable decline globally in 2023. Despite early optimism that the burgeoning African tech ecosystem might evade substantial damage, the increasing number of failed startups across the continent suggests otherwise.
Globally, according to PitchBook data, venture capital funding almost halved in the first six months of 2023 due to declining investor enthusiasm and reduced demand amid rising interest rates. The trend continued in Q3, with a 15% decrease compared to the previous year, as reported by Crunchbase.
In Africa, tech startups encountered significant challenges. In Q3, these startups secured just under US$500 million, totaling less than US$1.5 billion in the first nine months of the year—a 48% drop from the corresponding period in 2022. Unless a drastic turnaround occurs, it appears that funding for 2023 will decrease by approximately half compared to the previous year—a substantial reset in the industry.
The liquidity crunch in the market and the mounting difficulties faced by startups in attracting investors have particularly impacted a specific segment of African startups. Well-funded ventures previously focused on rapid growth strategies “at all costs” are now either compelled to pivot dramatically or cease operations. Consequently, Africa’s “startup graveyard,” which was relatively scant in significant closures until this year, is filling up faster than anticipated.
Here’s a list of ten notable startups that have ceased operations in 2023:
- Sendy: The Kenyan end-to-end fulfillment startup shut down operations in August due to reduced order volumes and increased fuel prices, despite raising US$20 million in capital in January 2020.
- 54gene: Despite securing US$45 million across three funding rounds, the genomics research company announced in September that it was winding down operations due to financial constraints.
- Dash: Ghanaian payments startup Dash, having raised an impressive US$86 million, folded in October amid allegations of financial impropriety and false reporting.
- WhereIsMyTransport: South African mobility startup WhereIsMyTransport closed down in October after failing to secure further investment, despite having received over US$27 million in funding.
- Lazerpay: Nigerian crypto and web3 company Lazerpay confirmed shutting down operations in April after failing to raise additional funding, following layoffs due to a withdrawn lead investor support.
- Zumi: Kenyan B2B e-commerce startup Zumi closed in March after failing to secure necessary funding, despite significant sales and customer acquisition.
- Zazuu: London-based marketplace for African remittance companies, Zazuu, shut down due to a lack of funding, despite raising over US$2 million.
- Hytch: Nigerian logistics startup Hytch confirmed its shutdown in February after failing to secure further funding within nine months of launch.
- Okada Books: Nigeria’s digital publishing pioneer, Okada Books, closed down due to insurmountable challenges in the macroeconomic environment.
- Pivo: Banking services startup for small supply chain businesses, Pivo, closed its doors, citing founder conflict alongside financial constraints.
Several previously high-growth ventures continue operating but have had to significantly alter their strategies due to changing market conditions, such as:
- Copia: Kenyan e-commerce company Copia withdrew from Uganda, focusing on profitability amid market shifts.
- MarketForce: Kenyan retail-tech startup MarketForce faced challenges after certain committed VCs backed out, leading to layoffs and a shift towards crowdfunding.
- Twiga Foods: Despite facing a debt collection lawsuit, Twiga Foods secured undisclosed funding as part of its refinancing process to continue its operations.
- Paystack: Nigerian payments company Paystack reduced its operations outside Africa to prioritize localization and cost efficiencies.
The funding downturn has forced closures and strategic changes for surviving companies, creating an uncertain and challenging environment for African tech startups.
